The Managing Director of a small manufacturing concern consults you as to the minimum price at which he can sell the output of one of the departments of the company which is intended for mass production in future. The companys records show the following particulars for this department for the past year: 

You ascertain that 40% of the works overheads fluctuate directly with production and 70% of the selling overheads fluctuate with sales. It is anticipated that the department would produce 500 units per annum and that direct labour charges per unit will be reduced by 20%, while fixed works overheads charges will increase by Rs. 3,000. Office overheads and fixed selling overheads charges are expected to show an increase of 25% but otherwise no changes are anticipated.

Transcribed Image Text:

Production and sales Materials Direct labour Direct charges Works overheads Office overheads Selling overheads Profit 100 units Rs. 13,000 7,000 1,000 Rs. 7,000 2,800 3,200 5,000 39,000